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6th Asia Economic Forum January 20-21, 2010

INVESTING IN PEACE. 6th Asia Economic Forum January 20-21, 2010. The Leopard Footprint. Southeast Asia Cambodia Laos Myanmar South Asia Sri Lanka Bangladesh Nepal Central Asia Kyrgyzstan Uzbekistan Tajikistan Mongolia Admin Office Hong Kong. Investing in Peace. 2.

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6th Asia Economic Forum January 20-21, 2010

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  1. INVESTING IN PEACE 6th AsiaEconomic Forum January 20-21, 2010

  2. The Leopard Footprint • Southeast Asia • Cambodia • Laos • Myanmar • South Asia • Sri Lanka • Bangladesh • Nepal • Central Asia • Kyrgyzstan • Uzbekistan • Tajikistan • Mongolia • Admin Office • Hong Kong Investing in Peace 2

  3. Global Investment Themes Evolution of Global Investment Themes: “EMERGING MARKETS” – IFC “BRICs” –Goldman Sachs “PEACE”-Leopard Capital Investing in Peace

  4. Executive Summary • Private Sector capital is the most useful source of development capital • Pre-Emerging And post-Conflict Economies (PEACE) offer the world’s best investment opportunities • Asia has many PEACE opportunities • Large companies are usually too bureaucratic and slow to respond early to PEACE • Entrepreneurs and small private equity funds can fill the gap • Don’t rely on media, NGOs, or politicians for useful investment information about PEACE countries:see for yourself Investing in Peace

  5. What is a Pre-Emerging Economy? • Low per-capita GDP • Domestic-driven economy • Low levels of debt • Examples: • Cambodia • Laos • Myanmar • Bangladesh • Kyrgyzstan • etc. Investing in Peace

  6. Developing Asia Comparison 2008 GDP Per Capita (PPP basis), in US$Source: World Bank Investing in Peace

  7. Domestic Driven Economy Investing in Peace

  8. Debt Burden Investing in Peace

  9. Post-Conflict Economies • “Post-Conflict” Economy: a devastating war, insurgency, or terrorism campaign has been ended through either a negotiated settlement or a decisive military victory • Examples: • Northern Ireland – negotiated settlement • Cambodia – negotiated settlement, then final military event 4 years later • East Timor • Nepal • Sri Lanka – military victory (2009) • Note: Post-Conflict Economies may also be Pre-Emerging Economies • Examples: • Cambodia • Nepal • East Timor Investing in Peace

  10. Why Invest in Peace Economies • Undiscovered = Underpriced • Breadth of Opportunities • Scale of Opportunities • Least competition • Most open economies • Natural Resilience • Basic products – agriculture, resources etc. • Youthful – countries of the future • Able to significantly reform • World wants to help: Infrastructure, trade benefits etc. • Economic Development helps lock in the Peace ! Investing in Peace

  11. INTRODUCING SRI LANKA Investing in Peace

  12. Meet Sri Lanka Asia’s Next Emerging Market Investing in Peace

  13. Why Sri Lanka? • Stable democratic government • Solid legal framework (ex-British colony) • South Asia’s most open economy (since 1977); private sector driven (85% of GDP) and non-monopolistic • Modern and efficient corporate sector (services, etc.) • Literate, skilled labor force; high labor standards (ILO) • English fluency common in urban areas • Very talented Diaspora (1-2 million) includes skilled doctors, lawyers, accountants, engineers, etc. • Spectacular tourism destination (culture, beach, eco) • Trans-shipment hub for India; expanding ports • Specialty agricultural exporter (tea, rubber, spices etc.) The Resplendent Isle Investing in Peace

  14. South Asia - Human Capital % ADULT LITERACY RATE Source: UNDP, 2009 Investing in Peace

  15. Upwardly Mobile Population Note: Population growth rate is under 1.0% Investing in Peace

  16. Sri Lanka’s Peace Dividend • GDP growth rate accelerating (7% in 2010) • Foreign reserves surging ($5.2bn) • Fiscal deficit falling (defense was 18% 2008 GDP) • Interest rates and inflation collapsed 16 Investing in Peace

  17. Foreign Stimulus Some Recent Support Pledges (incomplete list)Multi-Lateral USDmn Sample ProjectsIMF 2,600 Standby facility for Balance of Payments supportADB 800 Colombo port, water, wastewater, power, roads, finance World Bank 200 Roads (N-E), resettlement EU 40 Resettlement BilateralChina 850 Hambantota port/airport, Norochcholai coal power, railroadIndia 700 Railroad , Import finance, hospitalLibya* 500 Hambantota Airport (?), N-E infrastructureIran* 450 Refinery upgrade, Uma Ova hydropower/irrigation, oilJapan 400 Expressways, water supply, Galle portDenmark 155 Oluvil Port; water treatment *uncertain Investing in Peace

  18. North-East Economic Potential • North and East: as % of SL’s Total • Population: 14% • Landmass: 20% • Agricultural land: 9% • Land suitable for rice: 40% • Coastline: 60% • GDP contribution (2008 8% • Tricomalee: one of world’s best harbors • Arugam Bay: world-class surfing Mecca • 43 islands in N-E (19 clustered west of Jaffna) • East: granary of ancient Sri Lanka; 32 rivers flow to the sea. Also Sri Lanka’s best beaches. Reintegration Adds: - Markets - Land - Labor - Oceans Investing in Peace

  19. A Global Trans-shipment Hub Investing in Peace

  20. Two Sri Lanka Funds • Leopard Sri Lanka Fund LP • Private Equity Closed-Ended $100million • Leopard Sri Lanka Value Fund • Listed Equities Open-Ended $ 30 million 20 Investing in Peace

  21. CASE STUDY: CAMBODIA Investing in Peace

  22. Cambodia’s Post-Conflict GDP Growth Investing in Peace

  23. Key Indicators Inv esting in Peace

  24. LEOPARD CAMBODIA FUND Update Investing in Peace

  25. Leopard Cambodia Fund’s Investors Total: $34,135,000 Institutional investors: $11,750,000 Individuals: $21,635,000 Varma Mutual Pension Insurance: $10,000,000 Other institutions (AGIFEL etc): $1,750,000 GP: $750,000 Investing in Peace

  26. Investment Pipeline • Agri-business • Rice plantation • • Rice mill • Infrastructure • Rural power transmission • • Renewable Power Plant • Production • Beer brewery • • Mineral water bottler • • Shrimp processing plant Financial services • Bank • Micro-finance Institution Building a portfolio of basic industries • Technology • Mobile operator • • WiMax broadband • Property • Residential condominium • • Amusement Park • • Hotel • Initial commitment has been made Leopard Cambodia Fund

  27. Investments Committed • Rice Production: Cambodia Plantations • Investing up to $4 million to develop a rice plantation • Leasing approx. 3,000ha land via 70-year government concession • 2,000ha for cultivation, 1,000ha for internal water reservoir • Internal irrigation enables dry season rice; 4 month cycle • Fertile floodplain site:  target 7 tons rice/ha (national avg:  2.6 tons) • Experienced local farmer will manage execution • Land lease cost is very low by regional standards • Highly cash generative business; robust returns expected • Status: • Third party tests confirmed soil quality • Land lease acquisition underway; completion target 1Q10 • Site works and planting in 2010; first harvest in 2011 • Exit to global agricultural fund or strategic investor, or via IPO Leopard Cambodia Fund

  28. Investments Committed • Beer Production: Kingdom Breweries • Invested $2.0 million for 55.5% of a boutique brewery venture • Create a high quality beer for tourists, expats, and affluent locals • Export to niche markets • Phnom Penh based brewery will offer tours and tasting • Possibilities to expand into contract production, and to add complementary products, e.g. carbonated beverages • Management team led by a Chairman/Senior Advisor (52yrs of brewery experience at Carlsberg etc.), an international CEO, and an award-winnning German brewmaster skilled at creating new beers • Status: • Renovating a leased former Nestle factory  • Ordered new brewing line from Slovakia and bottling line from Italy • Hired the leading local branding/marketing agency (Bates121) • Target is to be bottling by July 2010 • Exit by trade sale or IPO Leopard Cambodia Fund

  29. Investments Committed • Power Transmission: Greenside Holdings • Invested US$1.3 million in a secured equity financing providing a fixed 20% p.a. return • Greenside holds 45% of GTS Transmission (GTST) which built and leased to Electricité du Cambodge (EDC) a US$4.25 million power grid in Kampong Cham province • EDC pays GTST a fixed $1.05 million p.a. for 25 years • GTST’s dividends to its 45% shareholder GTST provides ample state-originated cash flow to pay required $260,000 p.a. profit share payment to Leopard Cambodia Fund • Loan secured by Greenside’s share pledge of 45% of GTST, dividend pledge, and personal guarantee of Greenside owner • GTST renovated and expanded a 120 kilometer system of medium and low voltage networks, bringing grid power to 7,700 households and 375 new commercial and industrial customers • Status: • Monthly loan payments have been received on time • Loan is due in Dec 2015, with put option to recall earlier Leopard Cambodia Fund

  30. Investments in Pipeline • Microfinance Institution • Investing $1.5 million for minority stake in an existing Microfinance Institution • Provincial branch network • Historical ROE of 25-30% with interest rate spreads of over 20% • Healthy capital adequacy ratio and high quality loan portfolio • Low entry valuation provides potential rerating upside. • Status: • Term Sheet signed; transaction closing expected in Q1 2010 • Funds will be used to provide new loans • Exit by trade sale or IPO Leopard Cambodia Fund,

  31. Investments in Pipeline • Seafood Processing Plant: • Investing up to $2 million for a minority stake in Cambodia’s largest and most modern seafood processor • Production commenced September 2009 with capacity of 10 tonnes raw material/day; will scale up to 30-40 tonnes in 2012 • Purchases wild-caught shrimp from Cambodian fishermen (70%); imports needed balance (30%) from suppliers in Vietnam and Thailand • Customer targets: short term: Cambodia, Korea, medium term: Japan, Russia; long-term: Europe , North America • Labour intensive industry suitable for unskilled Cambodia workforce • As only a small producer Cambodia is unlikely to receive western anti-dumping penalties that affect Thailand and Vietnam processors • Other businesses may now start to develop a prawn farming industry Cambodia, expanding local raw material supply • Status: • Term Sheet negotiated • Exit by trade sale or IPO Leopard Cambodia Fund

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